Credit card issuers use social media to target students

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WEST PALM BEACH, Fla. — Just a few years ago, credit card companies set up tables at college campuses and offered students freebies such as T-shirts, candy, and Frisbees if they signed up for a card on the spot.

The Credit Card Accountability Responsibility and Disclosure Act of 2009, which took effect in February 2010, changed that scene. Now the companies are prohibited from soliciting within 1,000 feet of a college campus.

But students and parents can’t let their guard down. The companies are still hoping the young people will become credit card users. Now they’re more likely to attempt to snag them through social media such as Facebook, said Odysseas Papadimitriou, chief executive of credit card comparison website CardHub.com.

The timing couldn’t have been better for the financial institutions that issue credit cards, including banks. Social media already had a 90 percent reach on the 18- to 29-year-old demographic.

“They are on a virtual campus now,’’ he said. ‘‘The risk has not gone away.

“Young people represent a very important demographic for banks, as they are potential lifelong customers, a large percentage of whom are on track to earn college degrees. It’s therefore no surprise that we’re seeing banks use the online games and websites that young people use almost religiously in order to connect with them. It gives banks an ‘in,’ so to speak, and we should only expect to see their social media efforts intensify moving forward,’’ Papadimitriou said.

In many ways the new kinds of freebies, such as a $20 bonus when the student makes the first purchase, are even more dangerous, Papadimitriou said.

A survey released by Fannie Mae and Ipsos Public Affairs in July found that this year 35 percent of college students own a credit card, down from 40 percent in 2011 and 42 percent in 2010. In contrast, 80 percent of students carry debit cards, and 32 percent of students own both a debit and credit card.

Papadimitriou’s advice is for students to sign up for what’s known as a secured credit card. They’re a type of credit card for people with bad credit or no credit and require a fully refundable security deposit of at least $200. The deposit is your line of credit and spending limit. Unlike using a debit card, paying with the secured credit card helps build a credit history. It can also most likely be converted to an unsecured card later.

‘‘Embrace having your kid get a credit card, but lead them in the right direction,’’ Papadimitriou said. ‘‘Get them to sign up for a secured credit card and put their own money on the security deposit.’’

He also suggests parents offer to increase the security deposit by $50 after the student uses the card for nine months and is in good standing and has never missed a payment.

Although the deposit money is tied up, he said, the money is returned when the card is closed or converted to a credit card not requiring a deposit.

Then the student won’t fall into the trap, like so many do, of charging items on a regular, nonsecured credit card, not paying their bill, and ruining their credit for years, Papadimitriou said.

Here’s a few examples Card Hub found of credit cards going social:

■ Facebook apps and promotions: On one end of the spectrum, Chase is using social media to host giveaways and increase brand awareness, while American Express and Citi have taken a more integrated approach. Amex allows customers to link their credit cards to their Facebook accounts, sign up for deals, and automatically save when making corresponding purchases. Citi launched a Facebook app that allows customers to pool their rewards in order to garner extravagant perks, such as a public screening of the Olympics.

■ Virtual rewards for real purchases: American Express and the online gaming company Zynga have joined forces to offer a prepaid card that gives users the ability to earn virtual cash redeemable in the Farmville game. In addition, Discover gives new customers who sign up through Farmville a virtual currency rewards bonus that can be used in the game.

Since the Credit Card Accountability Responsibility and Disclosure Act of 2009 took effect in 2010, credit card issuers are not allowed to:

■ Issue cards to those under 21 unless they can prove sufficient income or they have a cosigner.

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